Trump Signs Emergency Order Opening Tax-Free 'Red Dye' Diesel to All Drivers as Prices Near Record
The White House says the move could save drivers over $100 a fill-up. Fuel analysts say the relief will likely be far smaller and messier than advertised.
President Trump signed an executive order late Monday temporarily lifting restrictions on tax-free "red dye" diesel for highway use, an attempt to blunt near-record diesel prices that he unveiled Tuesday during a midterm campaign rally in Nebraska.
The order waives the long-standing requirement that red-dyed diesel — fuel exempted from the federal 24.4-cent-per-gallon excise tax because it is intended for off-road equipment like tractors and construction machinery — be used only off-road. It directs the Treasury Department to defer collection of that tax for on-road use through the rest of 2026 without interest or penalty, and asks the Treasury secretary to explore eliminating it permanently, according to CBS News' report on the order.
A Fuel Market Under Pressure
The move comes as the national average diesel price sits at $6.32 a gallon, down slightly from a record $6.53 last month but still far above the $3.76 average recorded before the outbreak of the Iran war disrupted global energy markets. The White House says the order could save drivers more than $100 per fill-up in states that choose to follow suit with their own tax relief.
IT MIGHT LEAD TO SAVINGS FOR SOME, BUT THERE ARE A LOT OF DETAILS THAT WILL PREVENT THIS FROM HAVING WIDESPREAD RELIEF.
Fuel-market analysts were quick to pour cold water on the rosier projections. "It might lead to savings for some, but there are a lot of details that will prevent this from having widespread relief," said Patrick De Haan, head of petroleum analysis at GasBuddy, warning of a "convoluted patchwork" as truckers crossing state lines run into states that still ban road use of dyed diesel regardless of the federal order, according to NBC News' coverage of the rollout.
Critics also note the order does little for the farmers it is nominally aimed at helping, since most already have legal access to tax-free diesel for their equipment, and it does not address the underlying supply crunch driving prices higher in the first place. Some analysts warned that diverting a limited supply of dyed diesel to highway use while off-road demand stays constant could, paradoxically, push prices up rather than down in some regions.
The order takes effect immediately and runs through the end of 2026, with the administration saying it will reassess the policy, and whether to make any tax changes permanent, once fuel markets stabilize.